John McCormack reports in the Weekly Standard:
General Electric, one of the largest corporations in America, filed a whopping 57,000-page federal tax return earlier this year but didn’t pay taxes on $14 billion in profits. The return, which was filed electronically, would have been 19 feet high if printed out and stacked.
The fact that GE paid no taxes in 2010 was widely reported earlier this year, but the size of its tax return first came to light when House budget committee chairman Paul Ryan (R, Wisc.) made the case for corporate tax reform at a recent townhall meeting. “GE was able to utilize all of these various loopholes, all of these various deductions — it’s legal,” Ryan said. Nine billion dollars of GE’s profits came overseas, outside the jurisdiction of U.S. tax law. GE wasn’t taxed on $5 billion in U.S. profits because it utilized numerous deductions and tax credits, including tax breaks for investments in low-income housing, green energy, research and development, as well as depreciation of property.
Low-income housing, green energy, R&D, depreciation of property — GE fit a little something from all parts of the political spectrum in there.
In contrast, McCormack writes that (Atlanta-based) UPS paid an effective rate of 34 percent — which was not only, well, 34 percentage points more than GE paid, but a significantly higher rate than the 24 percent effective rate its top foreign-based rival, DHL paid.
Meanwhile, the Future of Capitalism blog points out that one of GE’s tax lawyers, Ken Kies, is
the same Ken Kies who was “Chief of Staff of the Congressional Joint Committee on Taxation from January 1995 until January 1998″ and who “From 1982 until 1987 … served as Chief Republican Tax Counsel to the Ways and Means Committee of the United States House of Representatives.” The revolving door turns again.
The unequal treatment of companies; the reduction of U.S. firms’ competitiveness with foreign-based companies; the astounding amount of human capital devoted to exploiting tax loopholes; the high likelihood that corporate resources are being allocated less than optimally because tax breaks artificially make certain activities more lucrative than they ought to be; the dampening of federal revenues; the inherent conflict of interest for politicians and bureaucrats who know that keeping the tax code complex will improve their future job prospects …
… do we need any more reasons to do corporate tax reform?
UPDATE: A spokesman for GE emails to say the company paid almost $2.7 billion of income taxes world-wide in 2010 and more than $1 billion in other federal, state and local taxes, and that losses for its financial arm, GE Capital, are the reason its tax rate was so low last year. He adds:
We believe that the U.S. tax system needs to be reformed and all loopholes should be closed. Furthermore, Congress needs to lower the corporate rate and provide the US a territorial system like every other major country in the world.
– By Kyle Wingfield